American insurer Travelers’ Q3 results have been boosted by a less volatile catastrophe year relative to 2017, posting an increased net income of $709 million and improved 96.6% consolidated combined ratio (CR).
Cat losses of $264 million after reinsurance and pre-tax decreased significantly from $700 million in the prior year quarter.
Net written premiums of just over $7 billion represents a rise of 6% from the prior year quarter and reflects growth in all segments.
Travelers’ Q3 CR represents a 9.2% improvement on last year, due to significantly lower cat losses. This was partially offset by net unfavourable prior year reserve development in the current quarter versus net favourable prior year reserve development in the prior year quarter.
Meanwhile, the Q3 underlying CR of 93.0% increased 0.2%. Net favourable prior year reserve development occurred in Bond & Specialty Insurance and Personal Insurance.
Net unfavourable prior year reserve development in Business Insurance included a $225 million increase in asbestos reserves, the same amount as in the prior year quarter.
Catastrophe losses primarily resulted from Hurricane Florence, wind and hail storms in several regions of the United States and a wildfire in California.
Against Travelers’ 2017 YTD performance, the CR of 96.8% improved 1.9% due to lower catastrophe losses of 2.1% and higher net favourable prior year reserve development of 0.1%, partially offset by a slightly higher underlying CR of 0.3%.
However, the underlying combined ratio of 93.0% represents a 0.3% increase against last year, primarily driven by higher non-catastrophe weather-related losses.
Elsewhere, Travelers returned $607 million to shareholders in the quarter, including $400 million of share repurchases.
YTD total capital returned to shareholders was $1.764 billion, including $1.151 billion of share repurchases.
Book value per share of $84.82 was down 3% from year-end 2017, due to the impact of higher interest rates on net unrealised investment gains/(losses).
“We are pleased to report strong third quarter results, including core income of $687 million and core return on equity of 12%,” said Alan Schnitzer, Chairman and Chief Executive Officer.
“Our combined ratio improved from the prior year and we delivered a solid underlying combined ratio. Net earned premiums increased, which, together with our strategic focus on productivity and efficiency, resulted in an expense ratio of 29.7%, a terrific result.”
“Net investment income pre-tax was very strong, increasing by 10% over the prior year quarter due to higher returns in both our fixed income and private equity portfolios. In terms of capital management, we returned $607 million of excess capital to our shareholders this quarter, including $400 million through share repurchases, bringing total capital returned to shareholders year to date to approximately $1.8 billion.”
“We remain very pleased with the execution of our marketplace strategies, as evidenced by a 6% increase in net written premiums to $7.1 billion. In Business Insurance, net written premiums were up 6%, benefiting from the ongoing roll out of our business centers and investments in technology and workflow, combined with strong execution by our domestic field organization.
“We continue to make meaningful progress on our innovation agenda to extend our lead in risk expertise, provide great experiences for our customers, agents and brokers, and improve productivity and efficiency,” he added.
